By Fresh market analysis has revealed that the average monthly cost of repaying a mortgage has climbed by 56% in the last decade, with a further 8% increase forecast by the end of the year.
Analysis focused on the average monthly cost of repaying a mortgage based on the average property value minus a 15% deposit and using the average standard variable rate mortgage fee for a 25 year term, as well as how this has changed over the last decade after adjusting for inflation.
Based on the average UK house price of £278,071 (2022 to date), minus a 15% deposit of £41,711, UK homebuyers require a mortgage loan to the tune of £236,360 in the current market.
With the current average rate for a standard variable rate mortgage at 5.17%, this means the average homebuyer is repaying £1,405 per month on their mortgage.
After adjusting for inflation, this is 26% higher than just five years ago (£1,115 per month) and 56% more per month than the average repayment of £899 10 years ago.
This increased monthly cost has, of course, been driven by the increased cost of buying a home, with the average UK property increasing in value by 26% in the last five years, up 65% in the last decade, while the average standard variable rate has increased by just 0.95% in the last ten years.
Unfortunately, there’s a double edged sword of cost increases predicted over the coming months that will further increase the monthly cost of repaying a mortgage.
By the end of this year alone, house prices are predicted to climb by a further 2.3%.
The salt in the wound for the nation’s homebuyers is that the average mortgage rate is also expected to increase by 0.5%.
This is a far higher rate of increase in just a few short months than the 0.16% increase seen over the last five whole years and more than half that seen over the last decade (0.95%).
This would see the average monthly cost of repaying a standard variable rate mortgage climb by a further £107 per month to £1,512 (+8%) – squeezing household finances by almost £1,300 more per year.
Founding Director Almas Uddin of Revolution Brokers, the company responsible for the research, commented:
“It’s certainly looking like a tough couple of months ahead with house price growth showing no signs of slowing, while mortgage rates are also set to spike by quite some margin when compared to the increases seen over the last decade.
For those looking to get a foot on the ladder, it means their monthly mortgage repayments will now be significantly higher, while those existing homeowners on a variable rate will also see their household finances squeezed that much further.
The silver lining is, that so far, property values have seemed impervious to the wider economic backdrop and so while the cost of homeownership is climbing, it remains a very sound investment.”
| Table shows the monthly cost of repaying a variable rate mortgage in each year after adjusting for inflation, as well as the estimated increase in this cost by the end of the year | ||||||
| Year | Average house price | Mortgage loan required (Minus 15% deposit) | Average mortgage rate (Standard Variable Rate) | Full monthly mortgage repayment (*Inflation adjusted) | Monthly repayment change (£) | Monthly repayment change (%) |
| 2022/23 Forecast | £284,536 | £241,855 | 5.67% | £1,512 | £107 | 8% |
| 2022 Current | £278,071 | £236,360 | 5.17% | £1,405 | £290 | 26% |
| 2017 | £221,403 | £188,192 | 4.38% | £1,115* | £216 | 24% |
| 2012 | £168,556 | £143,272 | 4.22% | £899* | N/A | N/A |
| United Kingdom – 2022/23 (forecast) | |
| Property average price | £284,536 |
| Average deposit at 15% | £42,680 |
| Mortgage loan required | £241,855 |
| Ave rate (Standard Variable Rate) | 5.67% |
| Term | 25 years |
| Full monthly repayment | £1,512 |
| Interest only monthly payment | £1,145 |
| United Kingdom – 2022 (now) | |
| Property average price | £278,071 |
| Average deposit at 15% | £41,711 |
| Mortgage loan required | £236,360 |
| Ave rate (Standard Variable Rate) | 5.17% |
| Term | 25 years |
| Full monthly repayment | £1,405 |
| Interest only monthly payment | £1,018 |
| United Kingdom – 2017 (5 year) | |
| Property average price | £221,403 |
| Average deposit at 15% | £33,210 |
| Mortgage loan required | £188,192 |
| Ave rate (Standard Variable Rate) | 4.38% |
| Term | 25 years |
| Full monthly repayment | £1,033 |
| Interest only monthly payment | £687 |
| Full monthly repayment – inflation adj | £1,115 |
| Interest only monthly payment – inflation adj | £741 |
| United Kingdom – 2012 (10 year) | |
| Property average price | £168,556 |
| Average deposit at 15% | £25,283 |
| Mortgage loan required | £143,272 |
| Ave rate (Standard Variable Rate) | 4.22% |
| Term | 25 years |
| Full monthly repayment | £774 |
| Interest only monthly payment | £504 |
| Full monthly repayment – inflation adj | £899 |
| Interest only monthly payment – inflation adj | £585 |
Average house price data sourced from Gov – UK House Price Index
Average mortgage rates sourced from BSA
Forecast increase in house prices by end of 2022/start of 2023 sourced from PropertyData
Forecast 0.5% increase in mortgage rates sourced from FT
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